Construction and retail turn backs on extended contraction

All sectors of the Dutch economy are now reporting growth or stabilisation for 2014, whereas ABN AMRO was still watching out for a contraction in construction and retail at the beginning of this year. However, the construction sector has returned to growth (+3 per cent) and retail is stabilising, ending a lengthy contraction. The same applies to the telecom, media & technology sector (TMT), which should hold steady in 2014 and pick up in 2015, thus broadening the recovery of the Dutch economy at large.

Subdued recovery follows usual pattern

Recovery in the Netherlands typically starts abroad, as the country’s exporters are the first to benefit from increased demand for our export products and services. Once capacity utilisation levels are back on track, capital spending is the next step in the economic cycle, with consumers bringing up the rear. This recovery is no different: we see the same pattern unfolding, a process that will take its own sweet time in a recovery that is currently best described as subdued.

Agriculture, food and industry

Internationally oriented sectors such as agriculture, food and industry typically recover early in the economic cycle. Agriculture has pulled through in fairly good shape. Like food, it relies heavily on exports but is relatively impervious to business cycles, which means that these sectors tend to grow a little less robustly than others on the uptrend of the cycle (agriculture +1 per cent in 2014 and 2015, food +1.5 per cent in 2014 and +2 per cent in 2015). At an expected uptick of 3 per cent in 2014, industry should be among the best performers, fuelled mainly by exports. The machinery and vehicle manufacturing industries are doing particularly well on the back of rising demand from both outside and inside the Netherlands.

Wholesale, transport & logistics (T&L)

The wholesale and T&L sectors may be focused across Dutch borders but also rely on the country’s domestic economy, and ABN AMRO predicts a slight increase in 2014 growth of 0.5 per cent for wholesale and 1 per cent for T&L. This doesn’t automatically feed through to the bottom line: some T&L sectors may well face ‘profitless’ growth on rising volumes as overcapacity bites.

Domestic sectors stop shrinking

Contraction in rather more domestic sectors such as retail, car retail and leisure would appear to have stopped now, with non-food stores reporting volume increases for the first five months of 2014. Consumer electronics and textile discounters shot up fastest, while DIY is also firmly in the black. Car retail is still struggling, but is now looking at cautious growth of 1 per cent in 2014 and 2 per cent in 2015, although overcapacity and low margins will keep many companies from recording firmly positive results. Leisure should stage a 2 per cent increase in both 2014 and 2015. The industry at large has come through the crisis relatively unscathed anyway, with falls in cyclical subsectors such as hotels offset by day trips and museum visits. Times remain tough for pubs, though.

TMT stabilises, business services expand

Business services and TMT industries show a large variety of trends. Both rely greatly on domestic performances but, for both, export is also becoming more important. The rather more broadly based recovery should bring a reversal in fortunes in most corners, although ABN AMRO doesn’t quite see TMT recording real growth in 2014, as bullish expectations for IT services are offset by less encouraging developments in publishing and printing. Business services, by contrast, might edge up 0.5 per cent as early as 2014.